Thirst For Big Car Engines Stays Strong, Bolsters Detroit
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By John D. Stoll
Of DOW JONES NEWSWIRES
DETROIT (Dow Jones)--Gasoline prices may be on the rise, but car buyers are still flocking to vehicles powered by large engines that tend to burn more fuel, which promises to be good news to Detroit auto makers building a majority of cars and trucks with bigger engines.
In the first quarter of the year, nearly 25% of U.S. car buyers opted for a car or truck equipped with an eight-cylinder engine, according to a report issued Monday by consumer research firm J.D. Power and Associates. During the same period, six-cylinder engines continued to dominate the market, representing about 40% of vehicle sales.
"So far, the perceived gas price increases have not had any discernable impact on new-vehicle buying patterns, at least with regard to the size of the engine," J.D. Power and Associates auto analyst Tom Libby said in a press release. The firm said the take rate, or number of people buying a specific size of engine, has remained constant with levels posted over the past nine months, even as gasoline prices have remained relatively high.
The sustained popularity of larger engines is good news for auto makers counting on buyers purchasing up-level options on cars and trucks. With rising material costs, a hyper-competitive market, and a strong appetite for rebates and discounts that reduce the profitability of cars and trucks, optional equipment - such as big engines - presents auto makers with needed profit potential.
The demand for power is crucial for Detroit's Big Three auto makers, which devote much of their engine plant capacity to building six- and eight-cylinder engines. At General Motors Corp. (GM), 40% of light vehicles built in the U.S. for the 2005 model year were equipped with eight-cylinder engines, according to trade publication Ward's Automotive Reports. Ford Motor Co. (F) equipped 44% of U.S.-built light vehicles with eight-cylinders during the same period, according to Ward's.
Engines often represent one of the highest-cost items on a car as a percentage of total parts content, as seen recently in the case of DaimlerChrysler AG's (DCX) Chrysler "Hemi" V-8 engine. Chrysler unleashed its Hemi earlier in the decade on a bevy of products, including sedans, pickups and station wagons. The engine is sold as part of a $10,000 package on some vehicles. More than 12% of Chrysler's vehicles built in the U.S. carry a Hemi, according to Ward's.
While buyers continue to rush to big engines, J.D. Power and Associates reports that between 30% and 33% of buyers during the first quarter purchased a car with a four-cylinder engine, which typically boasts better fuel economy, but often offers less power to consumers and leaves less profit for car companies.
The J.D. Power and Associates report comes as Americans face increasingly high fuel prices. On Monday, the national average price for a gallon of regular unleaded gasoline was $2.90, according to the American Automobile Association. Current prices outpace month-ago levels by 40 cents, and are about 70 cents higher than the same day one year ago.
-By John D. Stoll, Dow Jones Newswires; 313-226-1249; john.stoll@dowjones.com
(END) Dow Jones Newswires
April 24, 2006 15:11 ET (19:11 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.- - 03 11 PM EDT 04-24-06
-Jonathan Vuocolo; 201-938-5400; AskNewswires@dowjones.com
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(END) Dow Jones Newswires
April 24, 2006 15:53 ET (19:53 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.- - 03 53 PM EDT 04-24-06 |
